NATIONAL COUNCIL OF JUVENILE AND FAMILY COURT JUDGES AND AFFILIATES

Transcription

1 NATIONAL COUNCIL OF JUVENILE AND FAMILY COURT JUDGES Consolidated Financial Statements and Supplemental Information (With Summarized Financial Information for the Year Ended September 30, 2013) and Report Thereon Reports Required in Accordance with Office of Management and Budget Circular A-133

2 TABLE OF CONTENTS Page Independent Auditor s Report Consolidated Financial Statements Consolidated Statement of Financial Position... 3 Consolidated Statement of Activities... 4 Consolidated Statement of Cash Flows... 5 Notes to Consolidated Financial Statements Supplemental Information Consolidated Schedule of Functional Expenses Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by OMB Circular A Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Schedule of Findings and Questioned Costs

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors of the National Council of Juvenile and Family Court Judges and Affiliates Report on the Financial Statements We have audited the accompanying consolidated financial statements of the National Council of Juvenile and Family Court Judges and Affiliates (collectively referred to as the Organization), which comprise the consolidated statement of financial position as of September 30, 2014, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion

4 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of September 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Report on Summarized Comparative Information We have previously audited the Organization s 2013 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated February 14, In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2013 is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived. Report on Supplemental Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplemental consolidated schedule of functional expenses and schedule of expenditures of federal awards, as required by the Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 12, 2015, on our consideration of the Organization s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization s internal control over financial reporting and compliance. Raffa, P.C. Washington, DC March 12,

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION September 30, 2014 (With Summarized Financial Information as of September 30, 2013) ASSETS Cash and cash equivalents $ 1,761,045 $ 1,527,085 Grants and accounts receivable, net 1,237,477 1,669,685 Prepaid expenses and other assets 153, ,511 Investments 2,438,233 2,227,323 Property and equipment, net 73, ,145 Cash surrender value, life insurance policies 18,200 17,512 TOTAL ASSETS $ 5,682,191 $ 5,665,261 LIABILITIES AND NET ASSETS Liabilities Accounts payable $ 468,533 $ 727,369 Accrued payroll and employee benefits 586, ,755 Line of credit 200, ,000 Health insurance claims 114, ,720 Deferred revenue 1,392,590 1,519,646 TOTAL LIABILITIES 2,761,725 3,319,490 Net Assets Unrestricted (85,383) (377,322) Temporarily restricted 2,405,849 2,123,093 Permanently restricted 600, ,000 TOTAL NET ASSETS 2,920,466 2,345,771 TOTAL LIABILITIES AND NET ASSETS $ 5,682,191 $ 5,665,261 The accompanying notes are an integral part of these consolidated financial statements

6 CONSOLIDATED STATEMENT OF ACTIVITIES (With Summarized Financial Information for the Year Ended September 30, 2013) Temporarily Permanently Unrestricted Restricted Restricted Total Total REVENUE AND SUPPORT Federal and state grants and contracts $ 9,194,830 $ - $ - $ 9,194,830 $ 8,183,176 Foundation grants and contracts 1,666, ,632-1,788,181 1,501,735 Other grants and contributions 634,775 11, , ,796 Registration fees 417, , ,656 Dues and subscriptions 321, , ,475 Investment income, net 23, , , ,832 Other revenue 77, , ,685 Net assets released from restrictions: Satisfaction of program restrictions 42,659 (42,659) TOTAL REVENUE AND SUPPORT 12,378, ,756-12,660,928 11,732,355 EXPENSES Program Services: Juvenile and Family Law 3,804, ,804,777 3,267,866 Family Violence and Domestic Relations 3,287, ,287,267 2,855,098 National Center for Juvenile Justice 2,363, ,363,046 2,370,810 Total Program Services 9,455, ,455,090 8,493,774 Supporting Services: Management and general 2,346, ,346,962 2,762,029 Fundraising and grant proposals 284, , ,507 Total Supporting Services 2,631, ,631,143 3,023,536 TOTAL EXPENSES 12,086, ,086,233 11,517,310 CHANGE IN NET ASSETS 291, , , ,045 NET ASSETS, BEGINNING OF YEAR (377,322) 2,123, ,000 2,345,771 2,130,726 NET ASSETS, END OF YEAR $ (85,383) $ 2,405,849 $ 600,000 $ 2,920,466 $ 2,345,771 The accompanying notes are an integral part of these consolidated financial statements

7 CONSOLIDATED STATEMENT OF CASH FLOWS (With Summarized Financial Information for the Year Ended September 30, 2013) Increase (Decrease) in Cash and Cash Equivalents CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 574,695 $ 215,045 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 34,434 35,395 Net realized and unrealized gains on investments (174,968) (147,864) Changes in assets and liabilities: Grants and accounts receivable 432,208 (394,121) Prepaid expenses and other assets (38,014) 17,574 Accounts payable (258,836) 241,634 Accrued payroll and employee benefits 37,254 (91,474) Health insurance claims (9,127) 8,299 Deferred revenue (127,056) 577,369 NET CASH PROVIDED BY OPERATING ACTIVITIES 470, ,857 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments (1,276,605) (4,237,166) Proceeds from sales of investments 1,239,975 4,240,598 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (36,630) 3,432 CASH FLOWS FROM FINANCING ACTIVITIES Principal borrowings (payments) on line of credit (200,000) 50,000 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (200,000) 50,000 NET INCREASE IN CASH AND CASH EQUIVALENTS 233, ,289 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,527,085 1,011,796 CASH AND CASH EQUIVALENTS, END OF YEAR $ 1,761,045 $ 1,527,085 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 8,505 $ 13,321 The accompanying notes are an integral part of these consolidated financial statements

8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies Organization The National Council of Juvenile and Family Court Judges (the Council) is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, as a nonprofit charitable and educational organization. The Council is not a private foundation. The charitable and educational purposes of the Council include: (a) improving the standards, practices, and effectiveness of courts exercising jurisdiction over families and children; (b) informing or assisting those that deal with or affect these courts; (c) educating persons connected with these courts and other interested members of the public in developments and principles relating to such courts; and (d) engaging in educational and research activities in furtherance of the foregoing objectives. The principal office of the Council is located at the University of Nevada, Reno. The National Center for Juvenile Justice, the research division of the Council, is located in Pittsburgh, Pennsylvania. The National Council of Juvenile and Family Court Judges Fund, Inc. (the Fund) is a taxexempt organization under Section 501(c)(3) of the Internal Revenue Code that was organized to receive, manage and invest endowment funds and to apply the net income to support, benefit, and assist the Council. The National Juvenile Court Foundation, Inc. (the Foundation) is a tax-exempt organization under Section 501(c)(3) and 509(a)(3) of the Internal Revenue Code that is organized and at all times exclusively operated to support the Council and to raise funds and accept dues, gifts, contributions, bequests and endowments in the furtherance of the charitable purposes of the Council. Principles of Consolidation The consolidated financial statements include the accounts of the Council, the Fund and the Foundation (collectively referred to as the Organization). The Council, the Fund and the Foundation have been consolidated due to the presence of common control and economic interest. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Accounting The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements are prepared using the accrual basis of accounting. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments with initial maturities of three months or less. Cash and cash equivalents intended for investment purposes are included in investments in the accompanying consolidated statement of financial position

9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies (continued) Grants and Accounts Receivable The Organization uses the allowance method to record potentially uncollectible accounts receivable. Investments Investments are recorded in the accompanying consolidated financial statements at their estimated fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Unrealized gains or losses are determined by a comparison of fair value at the beginning and end of the reporting period. Fair Value Measurements In accordance with the accounting standards for fair value measurements for those assets and liabilities that are measured at fair value on a recurring basis, the Organization has categorized its applicable financial instruments into a required fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Applicable financial assets and liabilities are categorized based on the inputs to the valuation techniques as follows: Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Organization has the ability to access. Level 2 Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management s own assumptions about the assumptions a market participant would use in pricing the asset or liability

10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies (continued) Fair Value Measurements (continued) As of September 30, 2014, only the Organization s investments and the cash surrender value of the life insurance policies, as described in Note 5 of these consolidated financial statements, were measured at fair value on a recurring basis. Property and Equipment and Related Depreciation and Amortization Property and equipment exceeding $5,000 are capitalized and are carried at cost. Depreciation and amortization are recorded using the straight-line method in amounts sufficient to relate the cost of depreciable assets to operations over their estimated useful lives with no salvage value. Furniture and equipment have estimated useful lives of three to ten years. Maintenance and repairs are expensed as incurred. Significant renewals and betterments are capitalized. At the time assets are retired or otherwise disposed of, the property and related accumulated depreciation and amortization accounts are relieved of the applicable amounts and any gain or loss is credited or charged to income. All property purchased with federal funds may, in accordance with grantor agreements, be returned to the federal government. However, as day-to-day control lies with the grantee, such assets have been included in property and equipment in the Organization s consolidated statement of financial position. Net Assets The Organization s net assets are classified as follows: Unrestricted net assets represent funds that are available for support of the Organization s operations. Temporarily restricted net assets represent amounts that are subject to donor-imposed restrictions to be used for a particular purpose or within a specific time period. Permanently restricted net assets represent amounts that include donor-imposed restrictions that stipulate that the resources be maintained in perpetuity and that only the investment earnings on such amounts be used in the manner specified by the donor. Support and Revenue Recognition Grants and contributions are considered available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted revenue and support. Conditional promises to give are not included as revenue and support until such time as the conditions are substantially met. When a donor restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets - 8 -

11 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies (continued) Support and Revenue Recognition (continued) are reclassified to unrestricted net assets and are reported in the accompanying consolidated statement of activities as net assets released from restrictions. However, if a restriction is fulfilled in the same time period in which the contribution is received, the Organization reports the support as unrestricted. Revenue recognized on grants and contributions that has been committed to the Organization, but has not been received, is reflected as grants and accounts receivable in the accompanying consolidated statement of financial position. The Organization has grants and contracts with U.S. federal government agencies and other entities in exchange for services. Revenue from these grants and contracts is recognized as costs are incurred on the basis of direct costs plus allowable indirect expenses. Revenue recognized on grants and contracts for which payments have not been received is reflected as grants and accounts receivable in the accompanying consolidated statement of financial position. Funds received under grants and contracts, but not yet expended, are reflected as deferred revenue in the accompanying consolidated statement of financial position. Registration fees and the related costs for conferences and meetings are recognized in the year in which the conferences or meetings are held. Accordingly, registration and exhibit fees received in advance of the conferences or meetings are recorded as deferred revenue, and expenses paid in advance of the conferences or meetings are recorded as prepaid expenses in the accompanying consolidated statement of financial position. Dues and subscriptions are recognized as revenue in the period to which the dues or subscriptions relate. Accordingly, dues or subscriptions paid by members in advance of the membership period are reported as deferred revenue in the accompanying consolidated statement of financial position. Donated Services In-kind contributions are recognized as revenue and support and expenses in the accompanying consolidated statement of activities at their estimated fair value, as provided by the donor at the date of donation. Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the accompanying consolidated statement of activities. Accordingly, costs have been allocated based upon the functions they directly benefit or upon management s estimates of the proportion of these costs applicable to each function. Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates

12 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Cash and Cash Equivalents As of September 30, 2014, cash and cash equivalents included $485,489 of funds (including cumulative income) that have been restricted for the purpose of technology upgrades, judicial scholarships and building improvements. 3. Grants and Accounts Receivable Grants and accounts receivable consisted of the following as of September 30, 2014: Federal grants receivable $ 901,982 Other grants receivable 116,627 Contracts receivable 198,545 Other receivables 50,716 Employee advances 8,032 All amounts are due within one year. Total Grants and Accounts Receivable 1,275,902 Allowance for uncollectible accounts (38,425) Total Grants and Accounts Receivable, net $ 1,237, Investments Investments are stated at fair value and consisted of the following as of September 30, 2014: Common stocks $ 1,330,794 Fixed income obligations 809,799 Mutual funds 222,108 Cash and cash equivalents 75,532 Total $ 2,438,233 A summary of investment income is as follows for the year ended September 30, 2014: Interest and dividends, net of investment fees of $27,511 $ 37,243 Realized gains, net 29,434 Unrealized gains, net 144,846 Total $ 211,523 Included in investment income in the accompanying consolidated statement of activities is $3,405 of interest income earned on cash and cash equivalents and $688 of unrealized gain related to the cash surrender value of its insurance policies

13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Fair Value Measurements The following table summarizes the Organization s assets measured at fair value on a recurring basis as of September 30, 2014: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Total Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Common stocks: Utilities $ 289,957 $ 289,957 $ - $ - Technology 240, , Consumer non-durables 180, , Financials 107, , Energy 104, , Emerging markets 74,392 74, Healthcare 71,439 71, Consumer services 63,318 63, Other 57,582 57, Insurance 46,938 46, Industrials 42,353 42, International energy 30,754 30, Consumer discretionary 12,173 12, Transportation 8,674 8, Total Common Stocks 1,330,794 1,330, Fixed income obligations: Corporate bonds - domestic 287, ,437 - Government agency issues 199, , Government obligations 179, , Corporate bonds - foreign 76,759-76,759 - Mortgage-backed securities 41,071-41,071 - Municipal bonds 25,120-25,120 - Total Fixed Income Obligations 809, , ,387 - Mutual funds: Growth and income 113, , International 83,771 83, Dividend growth 25,178 25, Total Mutual Funds 222, ,

14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. Fair Value Measurements (continued) Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Total Assets Inputs Inputs () Fair Value (Level 1) (Level 2) (Level 3) Cash and cash equivalents $ 75,532 $ 75,532 $ - $ - Total Investments 2,438,233 2,007, ,387 - Cash surrender value of life insurance policies 18,200-18,200 - Total Assets $ 2,456,433 $ 2,007,846 $ 448,587 $ - The Organization used the following methods and significant assumptions to estimate fair value for assets recorded at fair value: Government obligations and agency issues, mutual funds and common stocks Valued at the closing price reported in the active market in which the individual securities are traded. Corporate bonds and mortgage-backed securities Valued based on current yields, the securities terms and conditions, and market activity. Information used includes market sources, credit information, observed market movement and sector news. Cash surrender value of life insurance policies Cash surrender value of the life insurance policies is based upon the reserve value, which is the face amount of the contracts discounted at a specific rate of interest, according to the insured s life expectancy. 6. Property and Equipment and Accumulated Depreciation and Amortization The Organization held the following property and equipment as of September 30, 2014: Furniture, fixtures and equipment $ 892,320 Less: Accumulated depreciation and amortization (818,609) Property and Equipment, Net $ 73,711 Depreciation and amortization expense totaled $34,434 for the year ended September 30,

15 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. Line of Credit The Organization has an unsecured $400,000 line of credit from a financial institution. The line of credit bears interest at the bank s prime rate (3.25% as of September 30, 2014). Borrowings under the line of credit are due upon demand and the line is subject to automatic annual renewal. As of September 30, 2014, there was $200,000 outstanding on this line of credit. Interest expense incurred under the line of credit was $8,505 for the year ended September 30, Commitments Leases The Organization leases operating facilities under several leases, the last of which expires in December Certain of these leases include annual escalation clauses, as well as cancellation options that allow the Organization to terminate the lease upon losing its federal funding associated with the leased office space. As a result of these cancellation options, the Organization does not recognize rent increases on a straight-line basis over the term of the lease. In addition to annual rentals, several of the leases require the Organization to pay a pro rata portion of the building operating expenses. The Organization also leases printing and copying equipment under noncancelable leases, which are considered operating leases. Certain leases continue on a month-to-month basis after 2016 which the Organization expects to pay. As of September 30, 2014, future minimum lease payments under these lease agreements are as follows: For the Year Ending September 30, 2015 $ 570, , , , ,920 Total $ 2,102,633 Total rent expense for these operating leases was $498,749 for the year ended September 30,

16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. Temporarily Restricted Net Assets Temporarily restricted net assets are restricted for the following purposes as of September 30, 2014: Research and Endowment includes endowment fund earnings $ 1,728,659 John Shaw Field Foundation fund 468,365 Other includes National Juvenile Court Foundation 208,825 Total $ 2,405, Endowment The Organization s endowment consists of donor-restricted endowment funds. As required by GAAP, net assets associated with an endowment fund are classified based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Organization s Board of Directors has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment; and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable gift instrument at the time the accumulation is added to the fund. The remaining portion of the donorrestricted endowment fund that is not classified as permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The Fund s duration and preservation. The purposes of the Organization and the donor-restricted endowment fund. General economic conditions. The possible effect of inflation and deflation. The expected total return from income and the appreciation of investments. Other resources of the Organization. The investment policy of the Organization

17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Endowment (continued) Return Objectives and Risk Parameters The Organization has adopted an investment policy for endowment assets that attempts to provide a predictable stream of funding to projects supported by its endowment, while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity or for donorspecified periods. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to produce results that exceed the price and yield results of a benchmark portfolio that consists of 55% of the S&P 500 Index and 45% of the Lehman Intermediate Government Credit Index, while assuming a moderate level of investment risk. As permitted by UPMIFA, the Organization has delegated management and investment of the endowment funds to an external investment manager that must comply with the Organization s investment policy and report investment performance to the Board of Directors. Strategies Employed for Achieving Objectives and Spending Policy To satisfy its long-term rate of return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Organization strives to be socially and fiscally responsible by committing to the fundamental principles of social responsibility and integrity by which companies operate that endorse the Global Sullivan Principles. The Organization has a policy for distributing 3% to 5% each year (depending on the project) of the endowment fund s average fair value over the prior 12 months through the calendar year-end preceding the fiscal year in which the distribution is planned. In formulating this policy, the Organization is considering the long-term expected return on its endowment. This is consistent with the Organization s objective to maintain the purchasing power of the endowment assets, as well as to provide additional real growth through new gifts and investment return. The Board of Directors appropriated none of the endowment earnings for expenditure during the year ended September 30, Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Organization to retain as a fund for perpetual duration. There were no such deficiencies as of September 30,

18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. Endowment (continued) Endowment net asset composition by fund type was as follows as of September 30, 2014: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ 1,669,471 $ 600,000 $ 2,269,471 Total Endowment Funds $ - $ 1,669,471 $ 600,000 $ 2,269,471 Changes in endowment net assets were as follows for the year ended September 30, 2014: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ - $ 1,477,743 $ 600,000 $ 2,077,743 Investment return: Investment income, net of fees - 33,211-33,211 Net appreciation (realized and unrealized) - 158, ,517 Total Investment Return - 191, ,728 Appropriations Endowment Net Assets, End of Year $ - $ 1,669,471 $ 600,000 $ 2,269,471 Permanently Restricted Net Assets The portion of perpetual endowment funds that are required to be retained permanently, either by explicit donor stipulation or by UPMIFA, are as follows: Research $ 600,000 Total Endowment Funds Classified as Permanently Restricted Net Assets $ 600,000 Temporarily Restricted Net Assets The portion of perpetual endowment funds subject to a time restriction under UPMIFA: With purpose restrictions $ 1,669,471 Without purpose restrictions - Total Endowment Funds Classified as Temporarily Restricted Net Assets $ 1,669,

19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Self-Insured Health Plan The Organization is self-insured for medical, dental, and vision coverage. Under the terms of the health plan, the Organization pays up to a maximum of $50,000 per individual per year. The health plan maintains stop-loss coverage with an insurance company to cover costs in excess of $50,000 per individual. The Organization currently pays 100% of the premiums for its employees and their dependents. Former employees are eligible to continue participation in the plan in accordance with current federal legislation. For the year ended September 30, 2014, total costs incurred were $700,277. Of these claims, the Organization ultimately paid $670,135. The remaining $30,142 exceeded the previously described stop-loss coverage and was paid by the insurance company. Claims incurred, but not paid or reported, were estimated to be $114,593 as of September 30, 2014, and are recorded as health insurance claims in the accompanying consolidated statement of financial position. 12. Retirement Plan The Organization sponsors a tax-sheltered annuity plan (the Plan) in accordance with Section 403(b) of the Internal Revenue Code, which permits employees to make tax-deferred investments through payroll deductions. For each plan participant who has completed one year of continuous full-time service, the Organization contributes to the Plan a percentage of each participant s salary. The maximum contribution level is currently 7%. Under the terms of the Plan, all contributions are immediately 100% vested with the employee. The Organization contributed $314,064 to the Plan for the year ended September 30, Concentrations and Contingencies Concentration of Credit Risk The Organization maintains its cash and cash equivalents with certain commercial financial institutions, which aggregate balance, at times, may exceed the Federal Deposit Insurance Corporation (FDIC) insured limit of $250,000 per depositor per institution. As of September 30, 2014, the Organization had approximately $1.9 million composed of demand deposits and savings and money market accounts, which exceeded the maximum limit insured by the FDIC by approximately $1.5 million. The Organization monitors the creditworthiness of these institutions and has not experienced any credit losses on its cash and cash equivalents

20 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Concentrations and Contingencies (continued) Hotel Contracts The Organization has entered into agreements with several hotels to provide conference facilities and room accommodations for its conferences and meetings through July The agreements contain clauses whereby the Organization is liable for liquidated damages in the event of cancellation or lower-than-anticipated attendance. As of September 30, 2014, the maximum possible amount of liquidated damages was approximately $507,000. Concentration of Revenue and Support The Organization receives a substantial portion of its revenue and support (approximately 72%) from federal grantors (both direct and pass-through awards) as follows: Department of Justice $ 7,910,361 Department of Health and Human Services 1,240,993 Total $ 9,151,354 Office of Management and Budget Circular A-133 Audit The Organization has instructed its independent auditors to audit its applicable federal programs for the year ended September 30, 2014, in compliance with Circular A-133 issued by the U.S. Office of Management and Budget (OMB). Until the audit is reviewed and accepted by the contracting or granting agencies, there exists a contingent liability to refund any amounts received in excess of allowable costs. Management believes that any matters arising from the reviews by the federal or pass-through agencies of the independent auditor s reports for fiscal year 2014 will not have a material effect on the Organization s financial position as of September 30, 2014, or its results of operations for the year then ended. Provisional Indirect Cost Rates Billings under cost-reimbursable government contracts and grants are calculated using provisional rates that permit recovery of indirect costs. These rates are subject to audit by the Department of Justice (DOJ), the Organization s cognizant agency. The audit results in the negotiation and determination of the final indirect cost rates, which may create a liability for indirect cost recovery for amounts billed in excess of the actual rates, or may allow for additional billings for unbilled indirect costs. The DOJ audits costs related to U.S. government contracts and grants in accordance with OMB Circular A-122. The DOJ has yet to audit the costs and indirect cost rates for the year ended September 30, Management believes that cost disallowances, if any, arising from the DOJ s audit for the year ended September 30, 2014, will not have a material effect on the Organization s financial position as of September 30, 2014, or the results of operations for the year then ended

21 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Related Parties The Organization s principal office is located on the campus of the University of Nevada, Reno (the University). The University provides office space for the Organization s operations at no charge to the Organization, and the Organization provides certain services to the University. Prior contributions to the Organization were provided to the University to defray the building s construction costs. Therefore, no amount for the estimated cost of the office space has been reflected in the accompanying consolidated financial statements. 15. Income Taxes The Organization is a nonprofit organization exempt from federal income taxes on income other than net unrelated business income under Section 501(c)(3) of the Internal Revenue Code. No provision for federal or state income taxes is required for the year ended September 30, 2014, as the Organization had no taxable net unrelated business income. The Organization follows the authoritative guidance relating to accounting for uncertainty in income taxes included in Accounting Standards Codification (ASC) Topic Income Taxes. These provisions provide consistent guidance for the accounting for uncertainty in income taxes recognized in an entity s consolidated financial statements and prescribe a threshold of more likely than not for recognition and derecognition of tax positions taken or expected to be taken in a tax return. The Organization performed an evaluation of uncertain tax positions for the year ended September 30, 2014, and determined that there were no matters that would require recognition in the consolidated financial statements or that may have any effect on its tax-exempt status. As of September 30, 2014, the statute of limitations for tax years ended September 30, 2011 through September 30, 2013 remain open with the U.S. federal jurisdiction or the various states and local jurisdictions in which the Organization files tax returns. It is the Organization s policy to recognize interest and/or penalties related to uncertain tax positions, if any, in income tax expense. 16. Prior Year Summarized Financial Information The accompanying consolidated financial statements include certain prior year summarized comparative information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization s consolidated financial statements for the year ended September 30, 2013, from which the summarized information was derived. 17. Subsequent Events In preparing these consolidated financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through March 12, 2015, the date the consolidated financial statements were available to be issued. There were no subsequent events that require recognition of, or disclosure in, the consolidated financial statements

22 SUPPLEMENTAL INFORMATION

23 CONSOLIDATED SCHEDULE OF FUNCTIONAL EXPENSES (With Summarized Financial Information for the Year Ended September 30, 2013) Program Services Supporting Services Family National Juvenile Violence Center for Total Fundraising Total and Family and Domestic Juvenile Program Management and Grant Supporting Law Relations Justice Services and General Proposals Services Total Total Personnel $ 2,073,856 $ 1,775,815 $ 1,634,995 $ 5,484,666 $ 1,565,079 $ 256,969 $ 1,822,048 $ 7,306,714 $ 7,819,536 Contractual 744, , ,292 1,613, ,147 12, ,444 1,760,797 1,548,256 Supplies and operating 299, , ,691 1,013, ,584 8, ,844 1,409,071 1,092,454 Travel 350, ,556 39, , ,732 2, , , ,343 Subrecipients 269, , , , ,520 Equipment lease and maintenance 59,307 26,182 8,133 93,622 19,976 2,319 22, ,917 91,039 Other Council activities - 2,060-2, , , , ,446 Depreciation and amortization 8,056 6,960 5,004 20,020 12,857 1,557 14,414 34,434 35,395 Interest expense ,505-8,505 8,505 13,321 $ 3,804,777 $ 3,287,267 $ 2,363,046 $ 9,455,090 $ 2,346,962 $ 284,181 $ 2,631,143 $ 12,086,233 $ 11,517,

24 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITOR S REPORT To the Board of Directors of the National Council of Juvenile and Family Court Judges and Affiliates Report on the Financial Statements We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the consolidated financial statements of the National Council of Juvenile and Family Court Judges and Affiliates (collectively referred to as the Organization), which comprise the consolidated statement of financial position as of September 30, 2014, and the related consolidated statements of activities and cash flows for the year then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated March 12, Internal Control Over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered the Organization s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified

25 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of consolidated financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Raffa, P.C. Washington, DC March 12,

26 REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY OMB CIRCULAR A-133 INDEPENDENT AUDITOR S REPORT To the Board of Directors of the National Council of Juvenile and Family Court Judges and Affiliates Report on Compliance for Each Major Federal Program We have audited the National Council of Juvenile and Family Court Judges and Affiliates (collectively referred to as the Organization) compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Organization s major federal programs for the year ended September 30, The Organization s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Organization s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization s compliance. Opinion on Each Major Federal Program In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30,